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Asian Crisis Compounds U.S. Farmers' Problems

Agriculture: Demand weakens as government removes subsidies, growers worldwide reap bumper crops and prices drop.


CLARKS HILL, Ind. — With demand from Asia sinking, pork is no longer bringing home the bacon for Hoosier farmer Jim Moseley.

"The reason we have $28 pigs now," said Moseley, recalling the days of $52 hogs, "is we had built a substantial demand base in Japan and Taiwan. The Asian crisis is hurting us."

He has lots of company. The nation's agricultural producers are feeling pinched as a falloff in Asian demand for grains, meats, cotton and produce takes a multibillion-dollar bite out of U.S. farm exports.

Compounding the woes are global bumper crops of wheat, corn and soybeans, which have sent prices plunging even as growers in this nation's midsection struggle with freak weather, crop diseases and the withdrawal of federal price supports. Meanwhile, the strong dollar is making U.S. goods less competitive abroad, and that is eroding the nation's usually healthy agricultural trade surplus.

Much of this is good news in the short run for U.S. grocery shoppers, who are finding plentiful bargains on beef, poultry and pork.

And truth be told, trouble in the Farm Belt is not as serious a matter for the broader economy as it used to be. Even compared with the 1980s, the last time American farmers took a serious hit, agriculture has become less of a force in the rapidly diversifying economies of the United States and of California, the nation's leader in agriculture.

"If all production agriculture ceased to exist tomorrow, we'd probably have a couple of down quarters, but it would not bring a depression to the country," said David B. Danbom, an agricultural historian at North Dakota State University in Fargo.

However, as Asia's economic trouble spreads around the globe, slowing growth in dozens of nations and lapping at U.S. shores, distress in the Farm Belt is bad news for the nation's trade deficit, for the historic effort to yank price supports out from under American agriculture and for entire regions of the country already battling long-term forces of economic decline.

"This goes beyond just another low point in the cycle," said Chuck Hassebrook, program director at the Center for Rural Affairs, a think tank in Walthill, Neb. "A lot of family farms have been hanging on for a decade. . . . This downturn is going to be the thing that washes out a lot of people."

Limited though farming's direct effect on the economy might be, troubles in farm country often do presage broader woes, another rural advocate said.

"The elements that are bringing the farm economy into a crisis now could bring the rest of the economy down as well," said Mark Ritchie, president of the Institute for Agriculture and Trade Policy, an independent research center in Minneapolis.

These include, he said, not just the Asian collapse and weather woes but also such mundane factors as transportation disruptions. Lingering snags from U.S. rail mergers are expected to delay shipments not only of bumper grain crops from the Midwest, but also of inbound products from Asia on their way to U.S. retailers' shelves.

A Key Part of Rural America

It's tough to reconcile the mythic importance of farmers and ranchers with the modern reality that agriculture barely amounts to a hill of soybeans in the economic scheme of things. But there it is: Farm production accounts for less than 1% of gross domestic product. In California, that role is slightly larger at 1.5%.

Even in farm country, historian Danbom notes, farming "has become sort of a curiosity occupation."

Yet as long as we've gotta eat, agriculture's importance will transcend such statistical measures. Besides, farming assumes a much bigger role through its links to a patchwork of other industries, such as feed, fertilizer, equipment, food processing and transportation.

In 1996, this "food and fiber system" contributed nearly 13% of GDP and employed 17% of the U.S. labor force. So trouble on the farm--such as a projected 12% nose dive in farm income this year--is trouble for others as well.

"You take $8 billion off net cash farm income, and they're not buying a new truck, going to Wal-Mart or taking the kids to Disneyland," said August R. "Gus" Schumacher Jr., undersecretary of agriculture for farm and foreign agricultural services.

Although the overall U.S. trade deficit seems to grow endlessly, farmers have long been a reliable antidote. The United States is the world's top exporter of farm products; one of every 3 acres of cropland produces for overseas markets.

But the government projects that Asia's woes will knock about $4 billion off farm exports to that region this fiscal year, which ends Sept. 30. That is down from the $24 billion sold in 1997. Japan will account for a third of that overall drop in Asia.

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